The month of July saw interesting activity, some of which is continuing even in August. Foreign portfolio investors (FPIs) have sold banks and IT stocks. On the other hand, domestic mutual funds (MFs) bought private sector banks, energy, staples and CPSE (central public sector enterprises) stocks. Let us take a detailed look at what happened.
MFs underperform Nifty50
According to a report by ICICI Securities, reported FPI AUMs fell 6.3% in Jul’19 to Rs 27.7 lakh crore, while falling 5.9% adjusting for outflows (Rs 12,400 crore outflow), thereby marginally underperforming NIFTY 50 (-5.7%). MF inflows for Jul’19 were Rs 15,000 crore in secondary markets. Estimated MF cash equity AUMs fell 4.6% (7.2% excluding inflows) to Rs 10.5 lakh crore during Jul’19 thereby sharply underperforming NIFTY 50.
Key reason for the underperformance is the relatively higher UnderWeight (UW) stance of MFs in outperforming sectors (IT and Consumer staples) and underperformance of OverWeight (OW) sectors (PSU banks and Consumer discretionary). Being UnderWeight means holding less of those stocks compared to the allocation of the same stocks in a benchmark like NIFTY50 and Sensex. Being OverWeight means holding more of those stocks compared to the allocation of the same stocks in a benchmark.
CPSE stocks and large private sector banks attract
Out of the overall net buying by MFs of Rs 27,500 crore, higher allocation was observed towards CPSE ETF stocks (Rs 12,400 crore). Excluding CPSE ETF stocks, buying was towards large caps (private sector banks, consumer staples and energy) while mid- and small-cap stocks saw little buying.
FPIs bought other financials, and sold IT and banks, while MFs bought private sector banks, energy, staples and industrials. MFs sold PSU banks and materials.
Take a look at the sectoral stance of FPIs and MFs in July 2019 below
For mutual funds, the top buys in large caps included NTPC, Axis Bank, Coal India, ONGC, IOCL, GAIL, HDFC Bank (where buying was more than Rs 1,000 crore). Top sells in largecap were Infosys, UPL, SBI, Indiabulls housing finance, M&M Ltd., and Dabur (selling more than Rs 100 crore).
For mutual funds, top buys in mid- and small caps were PFC, BEL, Oil India, and RBL Bank (buying more than Rs 200 crore), while top sells were REC, STFC, and Mindtree (selling more than Rs 400 crore).
Disclaimer: Views expressed here in this article are for general information and reading purpose only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader nor are they meant to serve as a professional guide/investment advice.